Objective
We determined whether the Operating Materials and Supplies (OM&S)–Ammunition owned by the Marine Corps, Navy, and Air Force (the other Services) and held by the Army was accurately reported on each Service’s respective financial statements.
Findings
Army-held, other Services-owned OM&S–Ammunition was not accurately reported on each of the other Service’s financial statements. Specifically, Army and other Service personnel did not adequately reconcile their records for 65.9 million Army-held OM&S–Ammunition, valued at $1.7 billion. This occurred because the Joint Ordnance Commanders Group OM&S–Ammunition management policies and procedures did not require the Army and other Services to comply with the DoD guidelines that require records maintained by the Army, as custodian, and the other Services’ financial reporting records to be the same.
In addition, other Services’ personnel recorded $8.5 billion of OM&S–Ammunition to the incorrect OM&S categories; inaccurately reported $1.6 billion in Excess, Obsolete, and Unserviceable OM&S assets; and inadequately supported $57 million in financial statement adjustments. This occurred because Office of Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD personnel did not provide adequate OM&S financial recording and reporting guidance, and the other Services’ personnel did not implement effective controls over the OM&S financial statement compilation processes.
Recommendations
We recommend that the:
- Commander, Army Joint Munitions Command, as Chairman of the Joint Ordnance Commanders Group, develop and issue policies and procedures to require the Army and other Services to comply with the DoD guidelines that require Army’s records to be the same as the owner’s records. Specifically, develop policies and procedures that require the Army and other Services to perform complete, quarterly reconciliations and retain OM&S–Ammunition asset documentation in accordance with DoD and U.S. National Archives and Records Administration guidance.
- Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD provide adequate OM&S financial recording and reporting guidance, including guidance to ensure OM&S–Ammunition records are correctly categorized and Excess, Obsolete, and Unserviceable OM&S is accurately reported.
- Commander, Naval Supply Systems Command, Global Logistics Support Ammo and Deputy Chief of Staff Air Force Headquarters, A4, in coordination with the Assistant Secretaries of the Navy and Air Force (Financial Management and Comptroller), comply with DoD criteria for ensuring OM&S–Ammunition records are correctly categorized.
- Assistant Secretary of the Air Force (Financial Management and Comptroller) reconcile amounts reported by field locations to General Accounting and Finance System–Re-Engineered on a quarterly basis and resolve differences.
Management Comments and Our Response
Comments on behalf of the Assistant Secretary of the Navy (Financial Management and Comptroller); Assistant Secretary of the Air Force (Financial Management and Comptroller); Deputy Chief of Staff, Air Force Headquarters, A4; and Commander, Naval Supply Systems Command, Global Logistics Support Ammo addressed all specifics of the recommendations, and no additional comments are required. However, comments from the Deputy Chief Financial Officer, responding on behalf of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD, and the Executive Director for Ammunition, Army JMC, responding on behalf of the Chairman of the Joint Ordnance Commanders Group, partially addressed their respective recommendations. The actions cited by the Deputy Chief Financial Officer did not completely address the specifics of the recommendation regarding disclosure of the valuation of Excess, Obsolete, and Unserviceable OM&S. The cited standard disclosure does not provide sufficient information on the basis for the valuation of Excess, Obsolete, and Unserviceable OM&S and does not inform the reader that this basis is not compliant with Statements of Federal Financial Accounting Standards. In addition, the actions proposed by the Executive Director did not completely address the development and implementation of policies and procedures to ensure:
- identification of requirements for reconciliation of cited data fields and inclusion of both wholesale and retail data;
- proper cataloging of cited data fields;
- Army and the other Services validate reconciliation file completeness;
- other Services specify and define the codes used to indicate ownership; and
- retention of custodial record supporting documentation for at least 2 years after
asset disposal or removal from agency’s financial statement.
Therefore, we request the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD, and Chairman of the Joint Ordnance Commanders Group provide additional comments to this report by August 25, 2016.
This report is a result of Project No. D2015-D000FL-0238.000.